Arsi University
College of Business and Economics
Department of Economics
BA Program in Economics
Econometrics II Assignment
INSTRUCTION: Attempt each of the problems. For numerical problems, you can use software
packages of your choice (SPSS, E-Views, etc). Note that except software outputs every other thing
should be hand-written.
1. Consider the following Binary logistic regression result.
. logistic low age lwt [Link] smoke ptl ht ui ftv
Logistic regression Number of obs = 189
LR chi2(9) = 33.37
Prob > chi2 = 0.0001
Log likelihood = -100.65256 Pseudo R2 = 0.1422
low Odds Ratio Std. Err. z P>|z| [95% Conf. Interval]
age .9708479 .0359496 -0.80 0.424 .902884 1.043928
lwt .9847225 .0068124 -2.23 0.026 .9714606 .9981654
race
black 3.56702 1.880935 2.41 0.016 1.268984 10.02663
other 2.413215 1.063576 2.00 0.046 1.017293 5.724613
smoke 2.557033 1.028214 2.33 0.020 1.162674 5.623607
ptl 1.721877 .5947137 1.57 0.116 .8750006 3.38841
ht 6.438372 4.490347 2.67 0.008 1.641036 25.26003
ui 2.154538 .9895882 1.67 0.095 .8757777 5.300472
ftv 1.067653 .1840484 0.38 0.704 .7615436 1.496805
_cons 1.612504 1.929872 0.40 0.690 .1544431 16.83577
Where, birth weight<2500g(low), age of mother(age), weight at last menstrual period(lwt),
race(race), smoker during pregnancy(smoke), premature labor history(ptl), has history of
hypertension(ht), presence, uterine irritability(ui), number of visits to physician during
the first trimester (ftv). In this case, the dependent variable low (containing 1 if a
newborn had a birth weight of less than 2500 grams and 0 otherwise). Based on this
interpret the above Binary logistic regression output based on the given odds ratio (OR).(3pt)
1
2. Consider the following demand supply model
Q a1 b1P c1y u1 demand function
Q a2 b2P c2R u2 Supply function
Where, Q is the quantity, P is the price, y is the income and R is the rainfall, and U1
and U2 are the error terms. Find the reduced for equation from the above structural
equation. (4pt)
3. Consider the three equation model
y1 13y3 12 x2 u1
y2 21y1 23y3 21 x1 22 x2 u2
y3 33 x3 u3
Where y1, y2, and y3 are endogenous, and x1, x3, and x3 are exogenous. Discus the
identification of each of the equations of the model, based on the Order and Rank
conditions. (6pt)
4. The following data is on LnGDP, lnPCE and lnPDI for the China starting from 1970 to
2027.
year lnLDP lnPCE lnPDI year lnLDP lnPCE lnPDI
1970 7.96304 7.49582 7.59619 2014 8.25855 7.8142 7.93154
1971 7.95868 7.4997 7.6109 2015 8.25437 7.81444 7.92902
1972 7.97129 7.50917 7.6233 2016 8.25959 7.81899 7.9424
1973 7.96336 7.50725 7.62325 2017 8.24357 7.81141 7.94051
1974 7.98715 7.52289 7.63719 2018 8.23114 7.81763 7.93559
1975 7.98868 7.53021 7.64874 2019 8.23512 7.8196 7.94619
1976 7.99497 7.53738 7.65283 2020 8.23068 7.82505 7.94768
1977 7.99995 7.55203 7.65969 2021 8.23207 7.83964 7.94895
1978 8.01872 7.56491 7.66374 2022 8.23841 7.84639 7.95283
1979 8.03583 7.58238 7.6728 2023 8.26526 7.8648 7.96102
1980 8.04745 7.59544 7.69344 2024 8.28005 7.87816 7.9735
1981 8.06322 7.61683 7.72842 2025 8.29707 7.8929 7.99315
1982 8.08743 7.63235 7.74097 2026 8.31618 7.90241 8.01737
1983 8.09181 7.63143 7.74725 2027 8.32942 7.91611 8.0281
1984 8.0908 7.63709 7.75701 2028 8.33481 7.92103 8.04003
1985 8.09837 7.63405 7.77599 2029 8.34146 7.93193 8.04511
1986 8.0893 7.62599 7.75564 2030 8.34802 7.94623 8.04674
1987 8.09181 7.62998 7.74262 2031 8.3558 7.95497 8.06765
1988 8.08305 7.63313 7.74717 2032 8.36846 7.97015 8.05722
1989 8.07912 7.62066 7.7466 2033 8.37413 7.97084 8.06423
2
1990 8.05643 7.62647 7.73303 2034 8.3872 7.98016 8.07946
1991 8.0679 7.64344 7.77917 2035 8.38656 7.98885 8.09603
1992 8.08638 7.65653 7.76404 2036 8.39222 8.00427 8.09334
1993 8.0994 7.66716 7.7788 2037 8.3955 8.01053 8.09138
1994 8.11871 7.68676 7.79338 2038 8.4029 8.01019 8.10022
1995 8.12243 7.6938 7.79766 2039 8.41523 8.02185 8.08385
1996 8.12593 7.7021 7.80168 2040 8.42492 8.03132 8.09733
1997 8.13631 7.71512 7.80771 2041 8.43934 8.03093 8.11247
1998 8.15087 7.72811 7.80914 2042 8.44576 8.04821 8.12566
1999 8.16764 7.73228 7.82016 2043 8.45634 8.05446 8.12749
2000 8.18155 7.74179 7.84031 2044 8.46263 8.06168 8.13373
2001 8.17954 7.75431 7.84628 2045 8.47213 8.07181 8.14413
2002 8.18641 7.76094 7.85837 2046 8.47841 8.07119 8.15303
2003 8.21798 7.78072 7.87546 2047 8.4831 8.07359 8.14639
2004 8.22566 7.7851 7.88352 2048 8.48583 8.08367 8.15102
2005 8.23737 7.79218 7.89391 2049 8.48873 8.08382 8.15852
2006 8.23769 7.79889 7.90071 2050 8.49306 8.08911 8.16945
2007 8.23862 7.79787 7.90012 2051 8.49705 8.08905 8.17338
2008 8.24473 7.80576 7.90666 2052 8.49766 8.09596 8.17386
2009 8.24659 7.81011 7.91136 2053 8.48779 8.08696 8.16891
2010 8.25083 7.80978 7.91677 2054 8.48136 8.08367 8.16474
2011 8.22486 7.78912 7.89804 2055 8.48481 8.08715 8.17115
2012 8.2251 7.79988 7.90931 2056 8.48935 8.09291 8.17185
2013 8.24499 7.81165 7.92913 2057 8.49044 8.09288 8.174
Where lnGDP is the natural logarithm of Gross Domestic Product, lnPCE is the natural logarithm
of personal conception expenditure and lnPDI is the natural logarithm of Personal Disposable
income.
The Econometric model for the above data series is:
ln RGDP 0 1 ln PCE B2 ln PDI U1
A) Conduct a unit root test for all variables and mention at what level these variables are
stationary using Augmented Dickey- Fuller (ADF) and Phillips-Perron (PP) unit
root tests.(6pt)
B) Find the optimal lag length using Akaike Information Criteria (AIC).(2pt)
C) Conduct ARDL bound test and check whether there is long run co-integration or not
among variables.(4pt)